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15 Top Tax Savings Tips for the Small Business Owner:
Tip #1 Business Health Insurance Tax Credit
Claim the maximum possible Small Business Health Insurance Tax Credit of up to 50 percent of premiums paid for staff health insurance coverage purchased through an exchange. File amended business returns for the three years prior to if the credit was missed or miscalculated.
Tip #2 Find Ways to Deduct Auto ExpensesThe best deduction, for nearly all kinds of businesses, is mileage. The exception is when you buy a very expensive vehicle or when you have a large truck with very low mileage on it. If you decide to claim actual expenses rather than mileage, one way you can substantiate the deduction is to "wrap" your car ie decorate your car with your business advertisements. Check your cell phone App Store for cool apps that can help you keep track of all business miles traveled.
Tip #3 Claim the Home Office Deduction This is a realistic deductible expense for many home businesses even if you do not work exclusively from home or if you only use a space within the home exclusively for your business. Calculating the correct percentage is critical especially if your business is incorporated but many claim the standard deduction of $1,500. If this applies to you, do not fear. Claim this deduction.
Tip #4 File Your Return to Claim a Refund
It amazes me how many do not file a return for long periods of time. They end up losing a refund if this was due to them. The statute of limitations is three years. So, if you have a refund coming to you (or think you might), then complete your tax return to receive it. It’s like free money at that point.
Tip #5 Deduct Miles for Charitable Activities
When itemizing deductions on your return, remember whether there was any mileage in conjunction with charitable events. Keep a record of it. Check your cell phone App Store for ways to keep track of charitable miles driven.
Tip #6 Deduct Non-Cash Contributions
The IRS requires special forms for taking non-cash contributions over $500. If you have a lot of items that you have donated, there are several excellent software packages you can use to document these to get fair-market value for them. You can then put this deduction on your Schedule A and have the backup records you need to support you.
Tip #7 Take the Maximum Sec 179 DeductionTake advantage of the use of the Section 179 Deduction, which is fully depreciating, or writing off new or used equipment purchases. The deductible amount changes each year. There is also, in addition to this, bonus depreciation and then standard depreciation.
Tip #8 Deduct Travel and Other Expenses You Are Required to Pay If Work Related
If you are required to:-
- a) use your vehicle for work activities (excluding traveling back and forth from work to home);
- b) use your own equipment (eg, computer, cell phone or home office);
- c) purchase items (like specialized clothing or professional licenses, etc) for employment, then determine if you qualify for this deduction as part of Form 2106 on Schedule A.
Tip #9 Deduct Your Per Diems
If your profession requires overnight travel and living expenses that you are responsible
for paying, you may be eligible for a deduction for per diems - expenses for travel, meals, and lodging. This could be a significant deduction for those who work away from home.
Tip #10 Maximize deductions to your Retirement PlanWhether you have an IRA, a SEP-IRA, an Owner 401K, a Safe-Harbor 401K, a Solo-401K, a pension plan, or any other kind of qualified plan, make the maximum contribution.
This can benefit you in multiple ways:
1) Your contribution directly offsets taxable income;
2) You still have the money. It is just reserved for a more pleasant retirement;
3) Your employer (or your own business, if self-employed) may be able to make contributions to your plan completely tax-free to you;
4) You might be eligible for a tax credit for contributions made. Make higher contributions if you are aged 55 or older.
Tip #11 You Are Always Eligible for A One-Time Waiver of PenaltyIf you owe the IRS money, take note that they offer a one-time waiver of penalty that you are eligible for, regardless of your circumstances. If you find one IRS agent denying you this option, go to another. The same holds true for a business – a business is eligible for a one-time waiver of penalty, regardless of what it was incurred for.
Tip #12 The IRS Will Settle Your Debt Under Certain CircumstancesThe IRS provides an option for an Offer In Compromise. If you owe the IRS taxes that you believe you are unable to pay, you may go through this process and make them an “Offer” to settle the debt. It is a complicated process, but with our help, it can be completed fairly easily. If you are in this position, you need to get professional advice because it could benefit you to the tune of hundreds or thousands of dollars. Schedule a meeting today either by calling our office at (253) 288-8829 or book this through our website at www.actiontaxteam.com/schedule-now/
If you do not qualify for an Offer, as in the case where you still make some income and wherein the IRS believes they can get paid the taxes due through the garnishment of your bank accounts, you will need to file paperwork with them to set a reasonable payment plan up.
Tip #13 Self-Employed Health Insurance Deduction
If you are self-employed and pay for health insurance, you may be able to deduct premiums paid during the year. This may include the cost to cover your children under age 27 even if they are not your dependents. Look at IRS Publication 535, Business Expenses, for more details.
Tip #14 100% Depreciation for SUV’sPurchase an SUV rated at 6,000 pounds or more fully loaded to be eligible for the $25,000 expensing election (if business use is at least 50%), and 50% bonus deprecation if restored after the election is taken.
Tip #15 Rent residence for tax-free Income
Increase tax-free income by renting your personal residence or vacation home for up to 14 days each year. If not otherwise rented, rent your personal residence and vacation home to shareholders, staff members, staff training and retreats and business meetings. Tax-deductible for the business, tax-free to you.